starbucks4ever (95.68)

And now price controls

6

And now China is considering price controls. That's an act of desperation when interest rake hikes don't help and doing nothing won't help either. As a palliative measure it might help, but the reason they had to go back to the practices of Chairman Mao is that they never created a viable domestic market that can ignore price swings of rice because it's a minor expense. The bottom line: all mercantilist economies run at full speed into a concrete wall sooner or a later.

Price controls can be effective when speculative prices don't reflect the reality of sufficiently large supply. If that's the case with Chinese food inflation, they may at least partially succeed. But I agree, as a general rule, it's a bad policy.

"Price controls can be effective when speculative prices don't reflect the reality of sufficiently large supply."

Does this have anything to do with speculation? Can it even be called inflation? They have a supply problem...prices should go up. Are they doing anything to discourage hoarding at the same time?...because price controls could help exhaust supply and cause far greater problems than if they just let supply/demand dictate pricing.